“Cloud Is Not Negatively Impacting Colocation, It’s Supplementing It”

LOS ANGELES, CA — The opening session of CapRE’s Seventh Annual Southwest Data Center Summit: The Telecom Evolution was a Keynote Presentation by Jason Shepard, Founder & Managing Principal at Cresa MCS. Findings from Cresa MCS Annual Colocation Survey provided a snapshot in to the state of the industry, and as part of that discussion, Shepard provided some high level results about the state of Hybrid Colocation.

“Let’s talk about Cloud and hybrid Colocation,” began Shepard. “I asked Zane Alsabery, CEO, Alchemy Communications, this morning, hey, do you have Cloud solutions available to your customers in your data center facility? Yes.”

New SquareAccording to Shepard, every single provider that his firm spoke to indicated that they have Cloud solutions available to their customers within their facilities. “Why is this important?” he asked the room. “A client I mentioned earlier, who said they were looking for 10,000 square feet and 20 cabinets, their monthly colo spend is about, I want to say, $15,000-$18,000 a month. It will fluctuate. But on top of that, they’re going to be paying, for a 10-gig point to point connection, maybe $2500 a month, per point to point connection.”

:If they have multiple point to point connections, their telecom spend, on top of the data center spend, is going to be $30,000 – $40,000 a month,” he asserted. “If we could go to facilities that have an eco-system of Cloud solutions on-site, I don’t need to purchase those expensive MPL circuits. I can actually just run a cross-connect in the meet-me room and then cross-connect to my Cloud provider. Or aggregate like with MegaPort.”

“So my question to them is, what impact is the Cloud having on your colo operations?” he divulged, referring to the slide above. Below are some of the highlights he shared with the crowd.

  • “Not everything is going to Cloud.”
  • “The really small guys are going straight to the Cloud.”
  • “Overall it’s been positive.”
  • New projects have less sprawl.”
  • There’s a learning curve for some clients, but overall colocation demand is growing across the board.

“So Cloud isn’t having a negative impact on Colocation demand – rather, it’s just supplementing it,” posited Shepard, confidently.

“Another question I asked was, what is hybrid colocation?” Shepard continued. “From my point of view, it’s the ability for uses to cross-connect, with a conduit to the Cloud, within the walls of an actual data center, to mitigate telecom spend. This is a telecom agent’s worst nightmare, right? Because they’re getting their 15%-25% annuities on all of that wasted telecom spend. If you’re going to just do a cross-connect, it eliminates all of the circuits. Telecom agents are not happy about that. So they’re trying to get back into the data center piece, but that cross-connect into a Cloud solutions is what we call Hybrid Colocation.”


“Another question we asked providers is, How important is hybrid colocation?” he continued, referring to the next slide, above, highlighting the responses below.

  • It’s on every RFP.
  • They don’t want all of their eggs in one basket.
  • Hybrid Colocation is 80% of all of the deals
  • Their company is making a push for the eco-system.

“So as you can see, everyone is talking about the actual model for being able to cross-connect into facilities,” concluded Shepard.

Jason Shepard, Founder & Managing Principal, CRESA

Jason Shepard specializes in representing end-users in multi-market evaluation, site selection and acquisition of data centers and/or real property for data center conversion across North America. Widely recognized as an expert in this field, Jason is regularly asked to speak at industry events, has been quoted in multiple media sources and has a specialty consulting practice exclusively for data center occupiers. Jason’s platform evolved during the technology boom of the late 1990’s. While most abandoned the market after the crash of 2000, Jason committed to building a better knowledgebase and client service offering. Between a decade of data center tenant representation, the volume of completed projects and a multitude of consulting assignments, Jason’s experience is unparalleled in the industry.

For more from Shepard, check out previous CapRE Insider Reports: